Drive Shack Jumps 18% As 4Q Earnings Exceed Estimates

Shares of Drive Shack closed 18.1% higher on Friday after the golf-related leisure and entertainment business operator delivered stellar 4Q earnings.

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Drive Shack’s (DS) earnings of $0.13 per share compared favorably with the year-ago period’s loss of $0.25 per share. Analysts were expecting a loss of $0.19 per share.

Revenues of $60.3 million topped the Street’s estimates of $55.7 million but declined 16% year-on-year, mainly due to lower revenues from the company’s four entertainment Drive Shack golf venues amid COVID-19 restrictions which led to lower event revenue. Nevertheless, the company said, “The strong momentum and demand for traditional golf continued for American Golf throughout the fourth quarter of 2020.”

Adjusted EBITDA was positive and stood at $5.3 million in 4Q, compared to an adjusted EBITDA loss of $2.1 million in the prior-year quarter, owing to revenue-driving and cost management initiatives. (See Drive Shack stock analysis on TipRanks)

BTIG analyst Peter Saleh maintained a Buy rating and a price target of $5 (59.2% upside potential) on the stock. In a note to investors, the analyst said that despite soft sales, the company recorded “materially better than expected” earnings in 4Q. Looking ahead, Saleh expects cost-savings measures to continue to drive EBITDA growth as COVID-19 restrictions ease.

Overall, DS has a Moderate Buy consensus rating on the stock based on 2 Buys. The average analyst price target of $5.25 implies upside potential of 67.2% to current levels. Shares have rallied by over 115% in the last year.